Investors will soon start their arrangement for investment in the Year of Rooster after the Spring Festival holiday. Multiple chief strategists of securities companies being surveyed hold that overseas events happened during the holiday will not influence the performance of A shares. Given liquidity environment and past experience, investors might embrace “sound performance of A shares in springtime”.
The US stocks dropped, while gold price rallied during the holiday. Turbulent overseas market makes investors worried about whether the A shares will be affected or not.
“Since the US market is still uncertain about the implementation of Trump’s policies, the US stocks lose the momentum to rise in the short term. But no impact is expected to be exercised on the performance of the A-share market.” Wang Sheng, chief strategist of Shenwan Hongyuan Securities, told the journalist that in comparison, the trend of A shares will be more steady. The performance of A shares after the Spring Festival might be similar with the situation seen during the March-June period of 2016. Now it is in the lower part of the fluctuation zone, investors should seize the opportunities when timing is proper.
Zhao Yang, chief strategist of Everbright Securities, also indicates that “the whole year's opportunities depend on a good start in spring” and Zhao is rosy about the performance of A shares in springtime.
According to experience in past years, it is highly possible for A shares to see sound performance in February. In the eyes of Zhao, A shares usually see sound performance during February and March. Statistics show that “sound performance of A shares in springtime” is most frequently seen in February. The A-share market only dropped in the February of two years during 2000 and 2016, but it rallied largely in subsequent March. It means that the A-share market reported increase in the February of the rest 15 years during 2000 and 2016.
In the meantime, multiple chief strategists of securities companies also attribute “the sound performance of A shares in springtime” to the improvement of capital supply and liquidity in the stock market.
Zhao indicates that it is highly possible for A shares to see sound performance in springtime because on the one hand, though the demand for capital is not large, the input of credit loans peaks in Q1. Therefore, the market sees ease capital supply; on the other hand, the market sees huge newly-added demand for financing after large amount of salaries are paid at end 2016.
As to liquidity in the stock market, Wang Delun, chief strategist with Industrial Securities, believes that the declaration of China Securities Regulatory Commission (CSRC) will further curb excessive financing in refinancing, helping to ease the liquidity pressure of the stock market and improve risk preference in the market.
In addition, better-than-expected economic growth might boost the “sound performance of A shares in springtime”. Wang believes that the market was too pessimistic about future economic growth earlier. The expectation will be improved later and the improvement might push up the market.
As to allocation, analysts hold that investment can be made in value stocks and theme stocks related to state-owned enterprises (SOEs) reform and agriculture.
Xun Yugen, chief strategist at Haitong Securities Co., Ltd., holds that the trend will remain the same for bank financing funds, insurance funds and pension funds to allocate equity assets. Such funds will be the marginal incremental funds of the A-share market in the first half, so value stocks are still worth of investment.
As to theme investment, Xun holds that new arrangement might be made for SOEs reform as local National People's Congress and the Chinese Political Consultative Conference are held intensively. Attention should be paid to relevant stocks. Industrial Securities believes that as the release of the annual "No.1 Central Document" approaches, attention can be paid to stocks related to themes like land transfer, agricultural reclamation reform and the supply-side reform in the agriculture sector.
Translated by Jennifer
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